The commercial property sector is under pressure. I wish there was some light at the end of the tunnel, but talking to those in the sector, it’s clear they are going through a tough time and are under severe stress.
For one, conversions of office space to residential have not quite hit the sweet spot. At the same time, South Africans – with labour data showing 1.4 million fewer are employed compared to the same time last year – are still reeling from Covid debt, meaning less shopping, less buying and less holidaying.
Companies themselves are calling for hybrid work weeks with some offering a day or two in the office, or even just a “hot desk” shared by different workers at different times.
None of this bodes well for commercial property owners and tenants. While retail is battling to maintain its position and the office sector is struggling, it’s the hotel sector that has been hardest hit. With less foreign travel and domestic travel also restricted because of Covid debt and, well, Covid, it doesn’t look good.
Construction companies also tell us building costs are high and things are tight. Distressed companies and affected landlords are under pressure to sustain themselves. Many tenants need urgent help from landlords who themselves are battling.
Faced with having empty properties, some landlords have had to relax their terms, offering rent holidays or other concessions. Of course, what’s bad for some is good for others and there is probably no better time for prospective tenants to get a good deal when it comes to renting office space.
Some tenants are even being given the first three to six months rent-free if they sign a long lease. Surprisingly there are some who say this decade may still see a boom. Looking at the picture painted by economists, looking at the stats as well as talking to commercial property owners at the moment it’s hard to see where this will come from.
However, this sector is known for its innovation and adaptability, and we are likely to see new emerging trends.
We are already seeing good things in the industrial sector, especially with storage facilities which have grown over this period. Let’s hold on to these green shoots and not be discouraged.